MandrakeSoft enters bankruptcy [LWN.net]

[This article was contributed by LWN reader Joe 'Zonker' Brockmeier

MandrakeSoft announced on Wednesday that it had filed for bankruptcy protection on Monday, January 13. The company filed for protection in France, a "declaration de cessation des paiements," which is similar to filing Chapter 11 bankruptcy in the United States.

MandrakeSoft currently has a debt load of about €2 million, or about $2.1 million U.S. The company will be able to continue operations, albeit under the direction of a court-appointed administrator. According to Gaël Duval, the co-founder of MandrakeSoft, the Mandrake development team is still on the job and will continue to release new products. "We're nearly at break-even and the business is growing every month. We do everything possible to ensure the best future for Mandrake. Users shouldn't be concerned. There will be future releases!"

The company is not the first Linux distributor to file for bankruptcy protection. Stormix Technologies debuted its Debian-based Storm Linux distribution in late 1999 and had filed for bankruptcy by January of 2001. The Vancouver-based company never recovered, and users of Storm Linux were left high and dry. Since Storm Linux contained a good deal of proprietary software, there was no way for users to continue development of the distribution on their own. Mandrake Linux users, at least, need not fear that problem.

The signs of monetary difficulties have been there for some time now. The company went public at the end of July, 2001 and raised a total of €4.3 million. Since that time, MandrakeSoft has issued several calls for user contributions, in the form of subscriptions to its Mandrake Users Club, to keep the company afloat on its way to profitability. The Mandrake Users Club offers a few perks, like the ability to vote on new packages, but hasn't been enough to lure the majority of Mandrake users into contributing.

Whether users should pour in cash now or wait and see whether MandrakeSoft pulls through is up to them, according to Duval. "If they want to boost our development, they should sign up." Duval says that it is unlikely that MandrakeSoft won't emerge from bankruptcy, but even if the company distributing Mandrake fails the distribution can go on. "Mandrake Linux is 100% Free Software so there are good chances that the project could continue."

The news of MandrakeSoft's bankruptcy filing is sure to reignite the debate over whether a company can make a profit on a product that is purely Free Software. There's no question that the number of people who buy Mandrake products or contribute money through the Mandrake Users' Club are far surpassed by the number of users who download and use Mandrake Linux without contributing money to the project.

Consolidation in the Linux distribution market seems inevitable. Still, it is unfortunate that MandrakeSoft, with its strong commitment to free software, has found itself in this situation. We can only hope that the bankruptcy process goes well, and MandrakeSoft is able to keep on serving its users for many years to come.

(Log in to post comments)

The right thing to do for Mandrake!

Posted Jan 16, 2003 3:14 UTC (Thu) by gproux (subscriber, #8286) [Link]

As the Mandrake product is totally free software, I imagine that it would be very easy for the current developers to let the company (with all its liabilities) die a peaceful way and build a new company on top of the ashes of the current one.

The new company would have exactly the same base (minus the servers and developers computers) but it would be "clean" of liabilities.
With a proven business model (Mandrake is "nearly" profitable), it would take no time for the new company to be in a much more comfortable situation than the old one.

As well, it would be time for Mandrake developers to take some time away from day to day constraints to rebuild a new idea for the future.
My suggestions:
Stop building a monster distribution and package stuff selectively and sell the end-products much cheaper.
- Mandrake Personal Multimedia Machine (30 euros)
A mandrake with a PVR interface that you can connec to your TV set
to record shows a la Tivo, show your family pictures and let you
listen to your OGG files.

- Mandrake Office (20 euros)
Mandrake with all the applications necessary for office work with all the nice printer drivers ready to work: Office, Evolution, lots of nice fonts, well integrated PDF reader, etc...

- Mandrake Home (20 euros)
Mandrake with all the software/drivers necessary to use your digital camera, the media rippers for the CDs, the Internet messenger, etc...

- Mandrake Net (10 euros)
All the tools carefully selected for a connected life (Bluetooth, Wireless Lan, xDSL connections...)

- Mandrake All (60 euros)

Of course, you could install any of the Mandrake on top of the other without losing anything....

The right thing to do for Mandrake!

Posted Jan 16, 2003 9:20 UTC (Thu) by beejaybee (guest, #1581) [Link]

" As the Mandrake product is totally free software, I imagine that it would be very easy for the current developers to let the company (with all its liabilities) die a peaceful way and build a new company on top of the ashes of the current one.

The new company would have exactly the same base (minus the servers and developers computers) but it would be "clean" of liabilities."

Whilst I agree that this would be a tidy solution, I think there may be legislation which limits the ability of companies to pull this sort of scam - which is rather common in such fields as the double-glazing & fitted kitchen businesses.

Imagine your feeling if you paid for goods or services which weren't delivered, then discovered exactly the same people offering the same goods or services having been freed from their obligations to deliver to or compensate you.

The WRONG thing to do. period.

Posted Jan 16, 2003 13:21 UTC (Thu) by guybar (subscriber, #798) [Link]

Apart from the moral problem, such a scam will mean no investor will _ever_ invest in a SW company which opens parts of its code base. not so good, IMHO.

Depend what you want to achieve...

Posted Jan 16, 2003 14:10 UTC (Thu) by gproux (subscriber, #8286) [Link]

... Actually Mandrake should get reborn as a 1901 Law association (basically a non-profit association in France).
I never want again to see stupid investors believe they should get any "return" from a free software project. The Mandrake Club would be much better if you would actually pay for a project that is made not for profit but only to the benefit of the club members.

Of course, it would mean the end of stock options and crazy salary for developers but it would allow the association to really invest all the money it has only for its users.

Another company should be set up,independant of the non-profit association, that would take over all the support contracts for the big customers of Mandrake.

seems like a good idea to me.

Depend what you want to achieve...

Posted Jan 16, 2003 15:08 UTC (Thu) by NAR (subscriber, #1313) [Link]

I never want again to see stupid investors believe they should get any "return" from a free software project.

I don't think any investors can be called stupid because they are expecting revenue from their investments. Those, who do not expect revenue, are not investors, but members of the Salvation Army or are called Mother Theresa, or something else.

it would allow the association to really invest all the money it has only for its users

If I remember well, LWN.net needs about 3000-4000 subscribers to sustain its 3 member staff. I'm not sure, how much staff are needed to produce a decent distribution, but let's make it 15. It means, that (if they would follow LWN's example) they would need 15000-20000 subscribers paying 2.5-10 USD/month. Do you really think it's feasible?

Bye,NAR

Feasible?

Posted Jan 16, 2003 16:51 UTC (Thu) by gproux (subscriber, #8286) [Link]

Have you heard about a little known project called Debian?

Feasible?

Posted Jan 17, 2003 11:54 UTC (Fri) by NAR (subscriber, #1313) [Link]

Yes. They are a project, not a company. They do not rent offices, pay secretaries, accountants, taxes, etc. Do they have any employees, who are payed by the project?

Bye,NAR

Feasible?

Posted Jan 19, 2003 7:03 UTC (Sun) by gproux (subscriber, #8286) [Link]

It seems I was not the only to think in the same line as what is proposed up there, have a look at ben reser homepage. Clearly a community take-over of Mandrake would be better for all Mandrake Linux end-users.